David Ricardo is a popular British economist who made a great contribution to classical economics. His legacy prevailed in the domain of economics for a long time and left a mark in history. The purpose of this paper is to explain the contributions of this distinguished economist, describe what differs them from the previous ones, and discuss their significance in the modern world.
His career began early: at the age of 14, he was already employed at the London Stock Exchange along with his father, who had a profession of a stockbroker. At 21, he built up his own business where he managed to make a fortune on the result of the Battle of Waterloo (Faccarello and Kurz, p. 120). This deal made him a wealthy and prosperous man almost overnight. In 1814, he was rich enough to retire and start leading the life of a gentleman. Unfortunately, he died at the age of 51 from an ear infection.
Ricardo is well-known for a number of his theories, which include, for example, the theory on wages and profit, the theory of rents, and the theory of international trade. The last one appears to be controversial and debatable. Ricardo suggested that international trade is always advantageous and promotes economic growth. His theory was based on the idea that countries gain profit from trade if they export goods in which they have a comparative advantage (Senga et al.). It means that countries use fewer resources to produce a certain product and, therefore, it is more beneficial for them to export it to other countries. Later, this theory was reconsidered and expanded, but it still has not lost its relevance. Indeed, international trade has been developing over decades and proved to be beneficial for the economy.
Illustrative examples of how this theory works in practice can also be provided. England is known to be one of the best cloth producers, and Portugal, in turn, specializes in producing wine (Senga et al.). So, these two countries had trade relations for a long time and got an advantage from it. Moreover, Salvatore states that trade is mutually beneficial, even when the two countries are exactly alike (p. 53). This statement provides further evidence that the Ricardian theory of international trade can be applied these days. However, the theory also received criticism from other economists and critics. Ricardo himself admitted that his theory has certain flaws and works only under certain conditions.
Ricardo drew inspiration from the works by Adam Smith, who is considered to be the father of economics. One of his works, “Wealth of Nations” exerted a strong influence on young Ricardo and even made him write newspaper articles and tracts on the theory of money (Faccarello and Kurz, p. 120). As a result, the world saw his classical approach which became one of the central pillars of economics.
Some of the Ricardian ideas are still applicable in the modern world. Those which became irrelevant and were replaced with the new ones anyhow influenced the development of economics. Ricardo was one of the pioneers in the field of economics and is well-known for substantially elaborating the ideas of such prominent economists as, for instance, Adam Smith. His theories and ideas made a significant contribution to the advancements in the sphere of economics.
All in all, David Ricardo is a crucial figure in the sphere of economics. With his works, he laid the foundation for the further development of this science and influenced other outstanding economists. His theories dominated economic thinking for centuries, and some of them are still playing an essential role in the current state of affairs in this field. It appears to be important to review works by classical economists as it helps to gain a better understanding of the current economic processes.
Works Cited
- Faccarello, Gilbert, and Heinz D. Kurz. Handbook on the History of Economic Analysis Volume I: Great Economists Since Petty and Boisguilbert. Edward Elgar Publishing, 2016.
- Salvatore, Dominick. International Economics. John Wiley & Sons, 2019.
- Senga, Shigeyoshi, et al. Ricardo and International Trade. Routledge, 2017.